Roach: The economic case for a full teacher pay raise

Recently, I’ve seen the “average teacher pay” metric as the go-to statistic used by legislators debating teachers’ salaries. The average is at least an incorrect measure and at worst purposefully deceptive because a first-year teacher’s salary is considered right alongside a veteran football coach’s. The current proposal is insufficient compared to our regional peers.

As an economics professor, I emphasize to my students that they need to use the metric that most honestly and accurately explains the data. Averages can be misleading because they are heavily influenced by outliers in the data and may not be indicative of a true population. Here’s an example: In the mid-1980s the average starting salary for geography majors from the University of North Carolina was more than $100,000. Sounds high, right? That’s because Michael Jordan was a geography major. I’m pretty sure His Airness’ aptitude in altitude had more to do with his pay than his geography skills.

If we remove the outlier, then the real average pay for these geography majors was much lower. That’s why using average teacher pay in Oklahoma is an inaccurate way to make one’s point. A more appropriate way to discuss teacher pay in Oklahoma is to examine the full distribution of teacher pay and the median teacher pay.

If we ordered teachers’ salaries from lowest to highest, we could then look at mile markers to determine how teachers in Oklahoma are paid compared to our regional peers. The mile markers used here mark the income level that different segments of the teacher distribution earn. For example, the 25-percent marker shows that one-quarter of all elementary teachers in Oklahoma earn $34,500 or less. Similarly, the 50-percent marker, or the median, shows 50 percent of teachers earn $38,400 or less. Clearly, this is very different than the widely used average teacher pay statistic of $42,460. In other words, the real “average teacher” earns nearly $4,000 less than the average pay in Oklahoma.

Comparing Oklahoma teacher pay to all surrounding states shows ours is much lower at every mile marker. In fact, the top quartile indicates that 75 percent of all teachers in Oklahoma earn less than the median salary in all other surrounding states.

Even with the Legislature’s plan to add $6,100 annually, the median Oklahoma income would fall behind surrounding states by $2,000 to $11,000.

In Texas, the bottom 10 percent of teachers earn about $42,000 per year. So, the lowest 10 percent of teachers in Texas currently earn more than 50 percent of all teachers in Oklahoma. The median teacher pay in Texas is a staggering $56,000. Compared to Oklahoma, not even teachers in the top 10 percent earn as much as the median Texas educator. That’s why the current pay proposal in Oklahoma is insufficient.

Under the current proposal, median teacher pay in Oklahoma would still be $12,000 less than Texas’ median. Even with the legislation passed the last week in March, the most veteran teachers in the state that will see the largest pay increase could move a few hours south and still be made better off.

Increasing teacher pay to a regionally competitive level has plenty of grounding in economic theory. Before he was known for his manufacturing prowess, Henry Ford famously offered $5 a day to his workers – nearly double the wage offered by neighboring manufacturers. That’s what economists call an efficiency wage. It’s higher than prevailing market wages.

Efficiency wages are able to attract higher-quality applicants, increase worker effort, and most importantly, reduce costly turnover. In our case, costly turnover is losing the multitude of excellent Oklahoma educators like Shawn Sheehan, the 2016 Teacher of the Year. The top-quality teachers who graduate from our universities will be more likely to stay in state and help educate the next generation of passionate professionals if we fully fund the education system and support educators. Moreover, taking the efficiency wage approach could actually turn the tables and attract the best educators from other states to Oklahoma.

Lastly, increasing teacher pay makes fiscal sense for future state funding. Economics research has shown time and again that the value of a good teacher is substantial. Peer-reviewed research has shown that improving teacher quality increases a student’s lifetime earnings potential by more than $1.5 million. Funding our educators and incentivizing the next generation of teachers to stay in the state can increase tax revenue. Better teachers yield a more productive and profitable workforce, which makes good sense for Oklahoma companies, and taxpayers.

Travis Roach is an economics professor and MBA faculty member at the University of Central Oklahoma.